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Gold futures tumble as CME margin hike weighs

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Forexpros - Gold futures were sharply lower for the third consecutive day on Thursday, hitting an eight-day low after the CME Group raised margins on gold contracts by the most in over two years, prompting investors to sell their positions to lock in gains.

On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,742.95 a troy ounce during late Asian trade, retreating 1.15%.

It earlier fell as much as 1.9% to trade at USD1,728.95 a troy ounce, the lowest price since August 15.

Gold prices are down almost 10% since surging to a record high of USD1,917.90 a troy ounce on August 23.

The CME Group, operator of the Comex raised the amount of cash that traders must deposit for speculative positions for the second time in two weeks, it announced late Wednesday.

The CME increased the so-called initial margin by 27% to USD9,450 per 100-ounce contract from USD7,425, pushing small investors out of the gold market as it raises the cost to trade a futures contract.

The margin for hedging will increase 22% to USD7,000 from USD5,500 per contract, effective as of the close of trading on Thursday.

Gold futures sank as much as 5% in the two days following the last CME margin hike on August 11.

On Wednesday, gold prices plunged nearly 6%, its biggest one-day drop since December 2008 after stronger-than-expected data on U.S. durable goods orders eased concerns over the U.S. economic outlook, dampening demand for safe haven assets.

Meanwhile, markets continued to look ahead to Friday's speech by Federal Reserve Chairman Ben Bernanke for any hints regarding fresh stimulus measures.

Elsewhere on the Comex, silver for September edged 0.4% higher to trade at USD39.90 a troy ounce, while copper for September delivery rose 0.49% to trade USD4.033 a pound.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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